An Introduction To Portfolio Finance

Posted by Emma Robison on Feb 8, 2019 4:42:07 AM
Emma Robison
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Owners of property portfolios may release equity in some or all of their properties to raise capital for any purpose. It is a type of specialist secured term finance which enables owners to leverage the power of their portfolio by combining multiple properties into one investment.

What Is Portfolio Finance Used For?

Typically it is used to expand the property portfolio or to consolidate multiple finance arrangements into one package. However, there isn’t always restrictions on what the funding can be used for allowing for commercial opportunities to be made the most of.

  • Buy-to-let landlords cash in on equity growth to acquire more properties, adjust the debt/equity ratio or build a cash reserve against downturns
  • Businesses release capital tied up in buildings or land for business development
  • Owners refinance portfolios to obtain more attractive terms

How Does Portfolio Finance Work?

Because portfolios may contain a mix of commercial, residential and HMO properties, financing them is a specialised service. Lenders take capital valuations and overall rental income into account when calculating the value of a portfolio. Large amounts may be underwritten by a panel of lenders. They will take a first or second charge across some or all the portfolio properties.

Advantages Of Portfolio Finance

  • Lower interest rates for a bulk deal compared with smaller individual finance arrangements
  • Resulting smaller repayments ease cash flow
  • Reduced restrictions as to how the funding is used
  • Suits individuals as well as businesses
  • One large loan presents no more issues than several individual ones.

Disadvantages Of Portfolio Finance

  • Selling an individual property requires the authorisation of the lender – which should not normally be a problem.

How To Go About Getting Portfolio Finance

Not all finance houses will lend to portfolio owners. Others have a minimum or maximum ceiling for the number of properties they will consider. It’s a competitive market and there are many good deals to be had when you know where to look. A specialist broker is best placed to assess your requirements and portfolio, and select the best lenders to approach.

Lenders are watchful for over exposure by portfolio owners. Therefore, they will examine:

  • Income from the portfolio and other sources
  • Portfolio cash flow – recent and projected
  • Overall mortgage (debt) borrowing for each property and across the entire portfolio
  • Total assets and liabilities
  • Experience of property investment
  • Business plan

Typical Loan To Value (LTV) funding is 70% to 85%.

Find Out More

A professional consultation with one of our specialist advisers will greatly help you secure the best portfolio finance deal. Call us today on 0345 50 50 888.

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Topics: Commercial Property Finance, Portfolio Finance

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